Is bull run becoming stretched?
Investors should bargain-hunt
27% of FTSE 100 shares have at least doubled in value in the five years since the credit crunch in May 2008, says Banc De Binary, the leading binary options trading firm. Ten of those companies have more than tripled in value, showing how dramatic the rally has been.
Banc De Binary says that these figures should sound a note of caution over how stretched the bull run has become, and says investors will now need to guard against sudden sell offs in the market.
Oren Laurent, CEO of Banc De Binary, comments: “Paradoxically as investors become more positive about the US and European economies they push up share prices making stock market valuations less attractive.”
“We are long term bulls on the economy and there are still lots of good bargains out there but now investors have to be selective in what they buy and not start taking risks that they can’t deal with.”
“The FTSE 100 still has significant momentum at the moment, but falls happen much more sharply than rises. Although a sustained correction isn’t necessarily imminent, investors shouldn’t entirely rule it out.”
Banc De Binary says that the biggest winner among the FTSE 100’s growth shares is Cambridge-based chip designer ARM Holdings, which has seen its share price rise from just over 100p in five years to reach 1,000p in May 2013. ARM is in fact the best-performing company in the entire FTSE All Share index, with share price growth of 865% over the last five years.
It is followed by retail investment giant Hargreaves Lansdown, currently trading at almost six times its 2008 price, and budget airline easyJet, which is trading at almost five times its price during the credit crunch.
Banc De Binary adds that 23% of current FTSE 250 shares have at least doubled in price in the last five years. In the FTSE 250, the biggest winners since the credit crunch include such household names as Rightmove, the property portal website, and Sports Direct, the sportswear retailer, both of which have seen their share prices quadruple since 2008.
The biggest fallers in share price in the current FTSE 100 over the past five years include resource giants ENRC, Anglo American, Vedanta and Rio Tinto, while the top three fallers in the FTSE 250 are all mining groups – Petropavlovsk, Lonmin, and Kazakhmys.
Says Oren Laurent: “Slowing growth in China has led to softer demand for commodities. Some of these big fallers may have the potential to bounce back, however, as growth in other Asian nations could pick up some of the slack caused shrinking Chinese demand.”
“Investors who do their research might find a bargain or two by buying shares that have bottomed out.”
